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CRL Cost Blowout Overblown

On Saturday the Herald proclaimed that the cost of the City Rail Link had blown out by $500 million which came on the heels of Prime Minister John Key saying that the project will “almost certainly cost more than they thought

The cost of Auckland’s most expensive project – the $2.5 billion City Rail Link (CRL) – has jumped to more than $3b.

Auckland Transport chief executive David Warburton says the project needs more money in the rail network that could easily take the “combined project cost” above $3b.

He understood that Prime Minister John Key was referring to additional investment in the rail network when he claimed last month the CRL will “almost certainly cost more than they thought”.

The article also quotes some unnamed sources, presumably from the government, claims extra work is needed for the CRL

A second source said that a “bit more rigour and discipline” since the Government had agreed to bring forward a business plan had identified work that should have been costed in the first place.

Aotea Station Design Platform Mar - 16

Of course it didn’t take long for the three councillors who have consistently opposed improvements to the city to jump on board and claim they predicted doom and gloom all along.

Confirmation by Auckland Transport that the cost of the City Rail Link will undoubtedly rise to over $3 billion does not surprise three Auckland councillors who recently wrote to the Auditor-General outlining their concerns about the project and urging the Office of the Auditor-General to ensure a close oversight. The trio now wonder what the ‘no go’ point is with the CRL.

It equally didn’t take long for Auckland Transport to (unusually) get in touch and tell me that the article was wrong and that they’d be making a formal complaint about it. They later provided me with the information David Warburton sent Orsman who seems to have confused and conflated a couple of issues.

Firstly, AT say the estimated price of the project remains $2.5 billion but the crucial aspect is that they say it has always been the centre of a range that could be +/- 20% – in other words they say it will cost between $2 billion and $3 billion depending on how tendering goes. It seems that Orsman and the herald have only taken the upper limit of this range to fit their narrative. They also say that “recent tenders for large civil works contracts in NZ have come in at 10% to 15% under the initial QS estimate“. They won’t actually give any examples of these projects though, saying their “pricing analysis is to assist in competitive indexing“. They also claim that the only people to benefit from claiming the prices have gone up are the those tendering for the work “creating an environment of high price expectation“. The CRL business case estimated the impact of the cost increasing by 20% and shows that even if that happens, the BCR drops from around 1.6 to 1.3, conversely if costs dropped by 20% the BCR rises to 1.9. This is shown below with the figures in 2015 $.

CRL Business Case - BCR range

Secondly, the CRL will unlock a lot of potential capacity across the entire rail network, that is after all the purpose of it. That doesn’t mean it’s the only thing that’s needed and it was already known that over time other improvements are needed. This includes things such as signalling upgrades, removal of level crossings, additional cross overs, the third main south of Westfield and many other improvements. Many of these were detailed in this presentation Kiwirail gave to the council’s infrastructure committee last year. Not all of these other improvements are likely to be needed on day one of the CRL and many will be things that can progressively be done over the years following the completion of the CRL to increase capacity of the rail network to its full potential. It seems that deciding which of these projects should or shouldn’t as part of the costs of the CRL is still being decided. On this, Warburton said

My understanding is the PM was referring CRL as part of the wider rail investment and there will be additional investment in the network to optimize the CRL work. One can easily discuss this as a combined project cost over the life of the project being above $3b. It simply depends on scope, pricing and how projects are related to CRL. That’s not equivalent to what I understood you/your informant were implying.

KR - Infrastructure Committee - Spending Needed

Of course splitting up projects into smaller chunks, some of which are completed later is nothing new and it happens all the time in other areas. One such example is the Waterview Connection and the Western Ring Route. The Waterview Connection project only covers the extension of SH20 from Maioro Rd, the tunnels and the Waterview interchange and is costed at $1.4 billion. Not included in that is the cost widening (and raising) of the SH16 causeway to handle the traffic or any of the other projects along SH16 to cope with the expected traffic demand. Those projects bring the total to over $2.4 billion and if you include the other projects from recent years needed to complete the Western Ring Route, that raises the cost to $4 billion. The image below is something I put together a few years ago so some figures will be out of date.

WRR Costs

So it seems this news by the Herald is the result of a number of factors but the actual situation hasn’t actually changed. The cost remains $2.5 billion as it has been for some time and as there were before, there are a number of other rail upgrades that will be needed over time.

But I also think that AT really haven’t helped themselves in how they’ve handled this issue. Given just the political posturing they should have known this would have come up but especially so since the Prime Ministers comments. Instead they seem to have deemed it all a non-story and so have let it run with not much done to challenge it. The responses to the Herald suggest a lack of cohesive and clear messaging which only adds to the confusion. It is also very difficult to find much, if any useful information about the project on the on the AT website, most of what is there is useless fluff or out of date. AT would help themselves if they were more open about the project and if the website was more useful.

34 comments to CRL Cost Blowout Overblown

  • Yes the Western Ring Route is the country’s biggest ever infrastructure project. Or is it the Waikato expressway?

    Either way, perhaps the dogged Mr Orsman will have done us all a favour if his relentless determination to muddy the news of this project provokes AT into developing a higher quality and more proactive communications strategy?

    Public institutions do have a responsibility not only to perform efficiently and creatively but also to be seen to be doing so. Onward.

    • John Lawson

      No, Waikato Expressway is around $2.7bn. But add that to the $4bn above and the $760m for the holiday highway and there’s over $7bn being wasted. Just think how many bike routes, trams, tunnels, extra tracks and high speed lines could have been built for that!

    • “perhaps the dogged Mr Orsman will have done us all a favour if his relentless determination to muddy the news of this project provokes AT into developing a higher quality and more proactive communications strategy?”

      Cmon, AT have had every opportunity to show us their well-paid comms team are worth it. Not sure what they do with their time, but the results are painfully obvious.

      One good clip about the CRL in the last few years? Sack your tired dolts and recruit people who know what they’re doing. Who are excited about this region’s potential, even. Every Aucklander deserves that.

  • Bruce

    Yes not the smartest idea. With a project like this all other non actual CRL stuff should have been kept compartmentalised away.

    Interesting that if it comes in under budget for tender then would they consider the Beresford Krd entrance?

  • Punch Drunk Baboon

    What about East West Link’s costs? Ballooning from a few hundred million to nearly $2 billion.

    That’s the criminal farce.

    • But the trucking industry are chipping in to help pay for it as they are the main beneficiaries, aren’t they?

      No? You mean they are asking tax payers to subsidise their business? What a shock.

      • Trundler

        And rate payers. I assume by George Wood’s lack of objection on the matter, that he sees the East-West link as a good use of North Shore resident’s rates (unlike the CRL which is like a million miles from the north shore).

  • Jeff T

    I guess this group are going to throw some more protests in before the build gets properly underway. It’s a big project, it’s going to cost a lot, like some of our road projects. It’s a drop compared to what we spend annually in pensions, transfer payments.

  • Furthermore. The additional wok on the rail network outlined by Kiwi Rail above amounts to some $3b, but that’s a 30 year programme, so $100 million a year. Hardly a startling sum considering this is making up for 60 years of neglect. And along the way it will enable ever more value from the network, both passenger and freight.

  • Graeme Easte,

    ATs handling of CRL costs has been cack-handed from day 1. The headline cost that is usually used by the media is not in current dollars but has been substantially “discounted” (inflation-proofed) to the cost in 2022 dollars. Many commentators have wrongly assumed that the already inflated costing requires further inflation. I have been trying for some time without success to get a breakdown of the numbers. As one small example, in November 2014 I asked what allowance had been made for resolving the Porters Avenue level crossing (probably in the range of $15-25 million) only to be told that there no specific budget for that element. 18 months later they solved that problem by declaring that the crossing will be closed and replaced with a footbridge (another good reason for getting on with replacement of the Dominion Road flyover with a bog standard signalised cross-road intersection). Doubling of capacity on the network post-CRL will require another half billion or so investment for extra rolling stock, improvements to signalling and stations, triple-tracking of the Main Trunk Line, etc., but these can all be phased in over time, and should not be counted as part of CRL.

    • Wellington Commuter

      ” I have been trying for some time without success to get a breakdown of the numbers.”

      Don’t bother, any breakdown of the $2.4Bm total cost of the CRL is a commercial secret according to Auckland transport. More specifically, under the OIA when asked for a breakdown of the CRL option capital cost from the business case, Auckland Transport has decided to:

      “withhold the information for the following reasons:
      • Under section 7(2)(i) to enable AT to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations); and
      • Under section 17(d), when the negotiations have concluded, the information will be publically available”

      • This is one of the comments Warburton made in response to question is why not give details out about price breakdown

        Getting back to the main issue at hand, it would not be commercially sensible to reveal component prices in the early stages of a multi – contract negotiating / tendering process. Obviously this is to avoid the risks of negatively impacting the tender process or price competition. It is not a single contract and historic behaviour on one contract may not necessarily be the basis to determine all future action. Consequently we will not be drawn into speculation on pricing options and risk analysis on pending contracts. Completed let contracts are released as advised above.

        • Wellington Commuter

          Sure … lets wait until the CRL contracts are signed and the billions in funding is committed to see if Auckland Transport’s CRL costing in the Business Case is sound.

          The CRL Business Case DID release the detailed cost breakdown of all options other than the CRL option but Auckland Transport always knew that the CRL option was going to be chosen so it was acting in the public interest to keep this information secret … wasn’t it ?

          • Sailor Boy

            The CRL business case revealed the same levels of costing for both. THe works package has been broken down to 10 components for each of which and indicative tender price has been given.

  • Richard Howard

    Well we told them to build it decades ago. Politicians got in the way of that obvious need. No botching now about the higher cost just build the thing and act like an issue progressive city.

  • James

    Looks like a storm in a tea cup fuelled by the same old tired Councillors. Searching for some background about CRL I found a pretty cool website called Emerging Auckland, http://www.emergingauckland.org.nz. Worth a look.

  • Sam L

    One of the interesting points you make is that AT do not do themselves any favours with how information is communicated. I totally agree and whilst going slightly off topic, this seems to be part of a wider trend at AT. This is true of almost all their policy roll outs – For example, the posters advertising the new monthly travel passes makes it sound like they are going up to $200 from $140 and in tiny font there is an explanation that it is cheaper to load money onto the pass rather than get a new monthly pass. Similarly their communication of travel plans for the of crowds after sports games at Eden Park is very poor. It seems they have great ideas they just don’t communicate them very well at all and people get frustrated.

    • Glyn W

      Another AT planning & communications total debacle was the intro of the Gold Hop Card. Total stuff up and pretty much still is. I’m convinced AT doesn’t know the true meaning of CONSULTATION or COMMUNICATION.

  • Ricardo

    Why are any of you surprised?. Take off your emotional hats and put on your commonsense hats. ALL projects of this nature will incur additional costs as more is diiscovered. The only projecct I’m aware of that ever came within the realms of the original pricing was the Waterview tunnel. You all get very excited whenever a roading project overruns, but horror or all horrors are now having palpitations when anyone suggests that the CRL may have additional work/components not originally taken into account. This is Project Management 101. Can you all at least be consistent with your responses to realities, otherwise this blog becomes farcical.

    • KLK

      The issue is with the inconsistency in reporting by the Herald. At best its mis-informed, more likely its being disingenuous.. The post clearly states that under/overruns of 20% are factored in. Pull your head in.

      Your posts are getting more desperate by the week and you continue to complain about the blog (boring) while failing, every time, to add anything constructive (even in opposition) let alone fact-based.

      I can only assume you have realized you are on the wrong side of history and are raging against the dying of the (car) light. Its great to witness.

    • Jeff T

      Maybe that should be directed at Orsman and the terrific trio at the Council, Ricardo. They are the one’s expressing outrage when a rail project shows potential for cost inflation but are never heard from if a roading project has similar potential.

    • Nick R

      I think you are quite wrong. On projects like this the costs start large due to uncertainty of estimation and as the design is refined and the tenderers work out their bid it usually drops. Well, actually it seems bad ideas get worse and good ideas get better, which is logical because something that is fundametally a bad idea raises more issues in design, while things that are fundamentally a good idea find efficiencies.

      With the CRL they have almost certainly priced it large due to uncertainty, but international consortia with tunneling experience will be able to provide a better deal.

    • Matthew W

      “ALL projects of this nature will incur additional costs as more is diiscovered. The only projecct I’m aware of that ever came within the realms of the original pricing was the Waterview tunnel. You all get very excited whenever a roading project overruns, but horror or all horrors are now having palpitations when anyone suggests that the CRL may have additional work/components not originally taken into account. This is Project Management 101. ”

      Actually what you are saying sounds like the opposite of project management. A major component of good project management is good risk management. That means identifying uncertainty and managing it. In the case of costs that can mean including probability adjusted pricing of risk into overall project costs. It also often means systematically increasing project estimates to allow for “optimism bias”. Do you think every contractor in the history of D+C projects has taken a bath? The answer no.

  • Jeff T

    Bob Jones used to refer to these sorts of outraged citizens as ‘wowsers’.

  • $3B to get 10,900 more commuters to the city by rail by 2026? Ignoring the 70% operating fare subsidy that these people will require – that is a $275,000 capital cost PER PERSON. Someone better go to south Auckland and tell those people living in cars the bad news – all the money is going to get white folk to their high paid jobs in the city a few minutes faster.

    • Sailor Boy

      Your numbers seem a little off…..

      You are suggesting that those are the only people who benefit, so surely they must be all of the passengers? Which would mean that patronage would only grow by 10,900 each way each weekday = ~5.5m a year. Yet we all know that the projections are much higher. I think you also forgot about the 3,000 people a day already arriving in the CBD from the West in the morning peak alone who will have shorter journeys.

      Perhaps you should be more concerned about the AWHC which will move 12,000 people maximum into the CBD in the morning peak for a total of $500,000 per person.

      • Hi Sailor Boy

        Numbers were here

        http://transportblog.co.nz/2016/06/07/are-crl-predictions-undercooked/

        Don’t know anything about the AWHC but that sounds expensive too.

        • Greg N

          That increase figure you quote as an “annual” figure is in fact ATs [low balled] projected increase per 2 hour AM peak period i.e. repeats for some 220 times a year, and also is similar in size the evenings.

          So the subsidy per person you quote is around 220 * 2 = 440 times too large. And ignores that this project will keep delivering those same improvement numbers for decades.

          Unlike road improvements – which tend to top out from induced traffic within 5 years for any improvement..So at that point you’re back to square one with roads projects.

          For comparison of how big that projected number is the same blog post says this:

          “While on the topic of trips to the city in the AM peak. It’s also worth pointing out just how significant the current numbers are. As a quick comparison Nelson St is the busiest road for traffic entering the city centre as is fed by two motorways yet despite this only around 6,000 people pass along here in the [2 hour] morning peak.”

          So there you have it, CRL allows the equivalent of the current 1.6 Nelson Streets of people movement – each and every AM and PM peak and all the hours in between.

          Its way better than any other big ticket transport investment this or any future local or central government can make in Auckland to help relieve congestion for now.

    • Currently 60,000 trips are made every weekday on the rail network, and this is rising rapidly. That figure will double, treble, or more, post CRL. These are people travelling and contributing to the economy while not cluttering the road network. The transfer from road user charges and property taxes to fund 50% of this operation is to cover the net benefit experienced by those road users made by the people using the rail network instead, and from the property taxes because of the similar benefit to the whole economy.

    • Jeff T

      Lots of people seem to be going to the city from South Auckland, and not just those white folk you mention.

  • I agree the various stages of the Western Ring Route are really one project, but then I suppose by that same token we should regard the existing line into Britomart as part of the CRL. The truth is, 50 years from now nobody is going to regard the tracks either side of Britomart as two different lines built at different times. I personally think the entire section from Quay Park to Mt Eden should be known as the City Rail Link (although it’s official name is set to be the North Island Main Trunk).

  • Hopping mad

    The tired old out of touch councillors along with their Herald publicity man need to go away and crawl under a rock.
    In the debate about the CRL can we please not forget the big picture – this is not just about a dead end station getting extended, it’s about the huge economic benefits this will bring. That includes revitalising city areas, making living near railway stations more attractive and so on.

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